Italy's budget deficit was 2.4% of gross domestic product (GDP) in 2003, well within the European Union's 3% limit broken by France and Germany.

But state debt was 106.2% of GDP, more than the government had predicted, and raised concerns about the balance of Europe's fourth-biggest economy.

Prime Minister Silvio Berlusconi said the country must now focus on boosting growth to aid "economic recovery".

He repeated his calls for tax cuts, and said there had to be more investment.

Goal missed

According to figures released by the statistical office Istat, the budget deficit was 2.4% of gross domestic product last year.

That is up on the previous year's total of 2.3%, but less than the 2.5% goal set by the Treasury.

As part of its so called stability-and-growth pact, the EU has set a limit of 3% for budget deficits in countries that are part of the region's single currency.

France and Germany have repeatedly topped this level, saying they need to spend more to ensure their economies recover.

2003 budget deficit levels

France 4.1%

Germany 3.9%

Italy 2.4%

On Monday, France's statistical office said the public sector budget deficit was 4.1%, more than the government had previously predicted.

INSEE, part of the French finance ministry, said the deficit comprised welfare and local authority finances as well as the central government budget.

Attempts by the European Commission to take France and Germany to task for breaking the stability pact failed when finance ministers from other eurozone reluctantly decided not to punish the two most powerful members.

Alluding to the big pair, Mr Berlusconi said over the past two years, Italy had "managed its public finances better than our European partners".

The prime minister has said he hopes to balance the budget by 2007 and cut total debt to less than 100% of GDP at the same time.

Exports hit

Istat said that Italy's borrowings in 2003 were 106.2% of GDP. That compares with 63% in France.

While the amount of Italian debt has fallen from last year, it topped government predictions.

The government blamed new methods of calculating total borrowings for the discrepancy.

Economic growth, meanwhile, was 0.3% in 2003, down from 0.4% the previous year, Istat said.

The main brake on expansion was the 20% increase in the euro against the US dollar that hit demand for exports.